Bitcoin enters first-ever hash-rate bear market, Twenty One Capital CEO says

Bitcoin’s network hash rate has entered a prolonged decline, marking what one industry executive calls the first “hash-rate bear market” in the cryptocurrency’s history. Raphael Zagury, CEO of U.S.-listed Bitcoin accumulation firm Twenty One Capital (XXI), said the network’s computational power peaked at nearly 1.3 ZH/s late last year and has since fallen steadily, according to a report from Wu Blockchain.

What is a hash-rate bear market?

Hash rate refers to the total computational power securing the Bitcoin network. A sustained drop in hash rate can signal miner capitulation, where operators shut down unprofitable machines, potentially reducing network security and slowing transaction processing. Zagury noted that the current decline is already the longest stretch on record for the hash rate to recover after hitting an all-time high.

Previous hash-rate dips, such as the one following China’s 2021 mining ban, were largely geographic relocations. Miners moved operations to other countries, and the network quickly rebounded. The current situation is structurally different, according to Zagury, because it coincides with a broader shift in the mining industry’s economic landscape.

AI and HPC infrastructure competition

Zagury pointed to the rise of artificial intelligence and high-performance computing (HPC) as a key factor. Many publicly listed mining companies are pivoting away from Bitcoin mining and toward AI data center operations, drawn by more stable revenue streams and long-term contracts. This transition reduces the amount of hardware dedicated to Bitcoin’s network, contributing to the hash-rate decline.

The trend is visible across the industry. Several major mining firms have repurposed their facilities to host AI workloads, and some have even sold portions of their Bitcoin mining fleets to fund AI infrastructure builds. This shift has created a new competitive dynamic for energy resources, as AI data centers often require similar power and cooling infrastructure as mining operations.

Why this matters for Bitcoin investors

A sustained hash-rate decline can affect Bitcoin’s network security and transaction processing, but it does not directly determine price. Historically, hash rate and price have been loosely correlated, but the relationship is complex. Lower hash rate can lead to reduced mining difficulty, which may make mining more profitable for remaining operators. However, if the decline is driven by miners leaving for AI, it could signal a long-term structural change in the industry.

For investors, the key takeaway is that Bitcoin’s mining ecosystem is evolving. The industry is no longer solely reliant on Bitcoin’s price; it is now intertwined with the broader tech infrastructure market. This could introduce new volatility and opportunities as miners adapt to changing economic incentives.

Conclusion

Bitcoin’s first-ever hash-rate bear market, as described by Twenty One Capital’s CEO, highlights a significant shift in the mining sector. The convergence of AI and HPC infrastructure is reshaping how miners operate, potentially leading to a more diversified but also more complex industry. As hash rate recovery remains uncertain, observers will be watching whether this is a temporary downturn or a fundamental reorientation of Bitcoin’s underlying infrastructure.

FAQs

Q1: What exactly is a hash-rate bear market?
A hash-rate bear market refers to a prolonged period where the total computational power of a blockchain network declines or stagnates, rather than growing. In Bitcoin’s context, this is an unusual occurrence, as hash rate has historically trended upward over time.

Q2: How does the AI shift affect Bitcoin mining?
Many mining companies are reallocating resources—such as energy contracts, facilities, and capital—toward AI and high-performance computing projects. This reduces the amount of hardware dedicated to Bitcoin mining, contributing to lower hash rate and potentially changing the industry’s revenue model.

Q3: Is a declining hash rate bad for Bitcoin?
A declining hash rate can reduce network security and make the network more vulnerable to attacks, but it can also lead to lower mining difficulty, which might improve profitability for remaining miners. The impact on Bitcoin’s price is not direct, but it can influence market sentiment and long-term infrastructure investment.